The people who say this most often are board members. Uninformed board members. Timid board members. Board members who don’t understand that charitable organizations live or die by their donors, and that you and I must spend money to acquire, steward, upgrade and retain our donors.

The surest way to win board approval for your donor acquisition and stewardship budget is to know your long-term donor value.

Long-term donor value defined
Long-term donor value is simply the gross amount of income you expect to receive from a typical donor during a given timeframe. When you know how much a typical donor is worth to your organization long-term, then you know how much you should be willing to invest to acquire, steward and upgrade that donor.

For example, if you know that your typical donor will donate roughly $1,998 to your charity during the first five years following that donor’s first gift, you should be willing to spend a fair amount of money to acquire and cultivate that donor.

The key to winning board approval is knowing how quickly a typical donor will break even, and how much that donor will give you over time.

How to calculate your long-term donor value

1. Decide on the time period you want to measure following the donor’s first gift. The period could be ten years, five years, three years–any period you want to measure. For the purposes of this illustration, I’m using a period of five years.

2. Choose an acquisition channel. Long-term donor value varies greatly depending on how donors are acquired. So don’t mix up your results. Pick just one channel of acquisition. In this example, we want to know the long-term value of donors acquired through direct mail.

3. Run a query on your donor database to find all the donors who gave their first gift to your organization five years ago in response to a direct mail donor acquisition mailing.

4. Run a report on these donors to find every gift they have ever given to your charity, through every channel (direct mail, phone, monthly, special event, online, bequest and so on).

5. Include the following fields in your report for each gift:

* Donor ID
* Date of gift
* Size of gift

6. Export the results of the report

7. Create a spreadsheet

8. Down the left side of the first column (Column A), create the following rows:

1. Donors Acquired
2. Cumulative Gifts
3. Cumulative Revenue
4. Cumulative Average Gifts Per Donor
5. Average Annual Gift
6. Long-Term Donor Value

9. In the columns to the right, create one column for each year. Our spreadsheet will look like this: Column B is Year 1, Column C is Year 2, Column D is Year 3, Column E is Year 4, Column F is Year 5

10. Populate Column B with the results for Year 1, the year of acquisition. It will look like this:
1. Donors Acquired, 6,856
2. Cumulative Gifts, 10,912
3. Cumulative Revenue, $3,002,975
4. Cumulative Average Gifts Per Donor, 1.6
5. Average Annual Gift, $275
6. Long-Term Donor Value, $438

To see a sample of this spreadsheet, click here.

11. Let’s look at Column B.
Row 1 is the number of donors you acquired in Year 1: 6,856

Row 2 is the total number of gifts these donors gave you in Year 1. Gifts given is larger than donors acquired because some donors gave more than once in Year 1.

Row 3 is the total dollar value of all the donations these donors gave in Year 1, through all channels.

Row 4 is a formula field that divides the Cumulative Gifts (Row 2) by the number of Donors who gave this year (Row 1).

Row 5 is a formula field that divides total revenue received that year (Row 3) by the number of donors (Row 1).

Row 6 is a formula field that multiplies Average Annual Gift (Row 5) by Cumulative Average Gifts Per Donor (Row 4).

To see a sample of this spreadsheet, click here.

13. For the remaining four years, you populate the columns in the same way and end up with a spreadsheet that looks like this (each column is separated by a comma):

Year 1, Year 2, Year 3, Year 4, Year 5
Donors Acquired in Year 1, 6,856
Cumulative Gifts, $10,912, $19,227, $26,553, $33,286, $38,376
Cumulative Average Gifts Per Donor, 1.6, 2.8, 3.9, 4.9, 5.6
Cumulative Revenue, $3,002,975, $4,877,466, $7,051,333, $10,781,172, $13,695,731
Average Annual Gift, $275, $254, $266, $324, $357
Long-Term Donor Value, $438, $712, $1,029, $1,573, $1,998

As you can see, the long-term value of a donor acquired by direct mail is $438 in Year 1 and $1,998 in Year 5. Your results may differ.

To see a sample of this spreadsheet, click here.

Remember this for the long-term
The longer the period of time you choose to calculate long-term donor value, the more important it is that you include every gift ever given by every channel. A new donor acquired by direct mail will likely give you only direct mail gifts for the first few years. But a donor acquired by direct mail who stays with your charity for 20 years may eventually give monthly gifts, contribute to your capital campaign, give at a special event, participate in your walk-a-thon, give online, respond to an email appeal, join your Legacy League, and leave you a sizeable bequest when she passes away.

The key to understanding your long-term donor value is always knowing which donor acquisition channel you are referring to and which gifts you are referring to. In the above example, the long-term donor value calculation is based on all donors acquired by direct mail five years ago and includes all the gifts they ever gave during those five years. Naturally, if this calculation included only their direct mail gifts in that time period, the results would be different.

Now approach your board of directors well-armed
As you can see, when you know what your average long-term donor value is, in other words, when you know how much money a typical donor gives to your charity in a given timeframe, you can approach your board with hard, persuasive evidence for investing in donor acquisition, donor stewardship, monthly donor conversion, bequest marketing, gift upgrading, mid-level-donor stewardship and much more.

To see a sample of this spreadsheet, click here.

Need help with your direct mail program?
Download this book now.
Mail Superiority: How to Run a Profitable Annual Direct Mail Fundraising Program.

Need help?
If you need help raising money through the mail , give me a call at Harvey McKinnon Associates, at (416) 537-2904 ext. 212

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Average lifetime value, of course, is the gross income you receive from your typical donor during the time the donor is giving to your charity.

Donors to your charity give different amounts. Some give a lot. Some give a little. Some give often, some give seldom. Some give one gift. Others give multiple gifts. Some give for a year. Others give for decades. Some give through one channel (direct mail, for example). Others give through multiple channels (direct mail, online, phone, special events).

Your goal as a fundraiser is to figure out how long your average donor gives to your organization, and how much that donor gives during that “lifetime.” You should know what this number is for every fundraising channel, and for all channels combined.

If your average lifetime donor value is high, then your donors likely stay with you for a long time. You are doing a good job of donor retention.

If your average lifetime donor value is high, your average donor likely gives through more than one channel during her lifetime (direct mail, phone, online, face to face, for example). You are doing a good job of multi-channel fundraising.

If your average lifetime donor value is high, your typical donor likely increases the size of her gift over time. You are doing a good job of donor upgrading.

If your average lifetime donor value is high, you are likely moving your donors up the “donor pyramid,” from single annual gifts, to multiple monthly gifts, to larger gifts (major or capital), and, eventually, to a bequest when they pass away. You are doing a good job of donor engagement and stewardship.

If your average lifetime donor value is high, you are obviously watching your key donor and revenue metrics, such as net cost to acquire a donor, average gift, attrition rate, renewal rate, average revenue per year per donor, average number of gifts per year per donor, return on investment, cost to raise a dollar, and so on.

If your average lifetime donor value is low, or shrinking, you likely have one of the following problems:

• You are attracting the wrong kinds of donors (one-gift, low-dollar)
• You are over-soliciting, or under-soliciting
• You are treating your donors as paycheques, not people
• You are not trying to move your donors up the donor pyramid
• You are not segmenting your donors based on recency, frequency and monetary value, and are therefore not maximizing the value of each donor in your database

When your average donors stay with you for a long time, and increase their level of commitment over time, you are clearly creating and maintaining meaningful, mutually beneficial relationships with your supporters. You know that because your average donor lifetime value tells you so.

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Let’s assume you need to raise $1 million annually.

Step 1: List your giving methods.
Open a new spreadsheet. In Column A, list the methods you’ll use to raise funds from donors. Your column will look something like this:

INDIVIDUALS
Direct Mail
Email
Major Gifts
Monthly Giving
Online

INSTITUTIONS
Corporations
Foundations
Government

Step 2: Assign a percentage of your total revenue goal to each fundraising method.
Most charities raise 80% of their annual income from individuals and the remaining 20% from institutions. In Column B, assign a percentage to each method to show the percentage of your annual revenue goal you’ll raise from each method. Your column will look like this:

INDIVIDUALS: PORTION OF ANNUAL REVENUE GOAL, %
Direct Mail: 30%
Email: 10%
Major Gifts: 20%
Monthly Giving: 10%
Online: 10%
SUB-TOTAL: 80%

INSTITUTIONS: PORTION OF ANNUAL REVENUE GOAL, %
Corporations: 5%
Foundations: 10%
Government: 5%
SUB-TOTAL: 20%
GRAND TOTAL: 100%

Step 3: Calculate how much revenue will come from each fundraising method.
In Column C, multiply your annual revenue goal (in this case, $1 million), by the percentage revenue goal for each method. Your results will look like this:

INDIVIDUALS: PORTION OF ANNUAL REVENUE GOAL, $
Direct Mail: $300,000
Email: $100,000
Major Gifts: $200,000
Monthly Giving: $100,000
Online: $100,000
SUB-TOTAL: $800,000

INSTITUTIONS: PORTION OF ANNUAL REVENUE GOAL, $
Corporations: $50,000
Foundations: $100,000
Government: $50,000
SUB-TOTAL: $200,000
GRAND TOTAL: $1,000,000

Step 4: Calculate your average annual revenue per donor, per fundraising method.
Based on your experience with donors from each fundraising method, calculate in Column D how much each donor will donate each year, on average. Your column will look like this:

INDIVIDUALS: AVERAGE ANNUAL REVENUE PER DONOR TYPE
Direct Mail Donor: $80
Email Donor: $80
Major Donor: $10,000
Monthly Donor: $360 ($30/mo.)
Online Donor: $150

INSTITUTIONS: AVERAGE ANNUAL REVENUE PER DONOR TYPE
Corporation: $10,000
Foundation: $20,000
Government: $50,000

Step 5: Calculate how many donors you’ll need per fundraising method to reach your annual revenue goal.
In Column E, divide your revenue goal per method (Step 3) by the average annual revenue per donor type (Step 4). Your column will look like this:

INDIVIDUALS: DONORS NEEDED TO REACH $1 MILLION ANNUAL GOAL
Direct Mail Donors: 3,750
Email Donors: 1,250
Major Donors: 20
Monthly Donors: 278
Online Donors: 667
SUB-TOTAL: 5,964

INSTITUTIONS: DONORS NEEDED TO REACH $1 MILLION ANNUAL GOAL
Corporations: 5
Foundations: 5
Government: 1
SUB-TOTAL: 11
GRAND TOTAL: 5,975

Thus, to reach this hypothetical annual fundraising goal of $1 million, you’ll need to acquire 5,975 donors. Your results will vary, of course, depending on the fundraising methods you use, the percentage of your annual revenue goal you aim to generate with each method, and your average annual revenue per donor type. But the same principles apply.

Learn More
Attend my six-part tele-seminar, How to Run a Successful Direct Mail Fundraising Program. Taught over the phone six Saturdays in a row. My most popular seminar. Starts September 3, 2011. Early Bird Special expires August 27, 2011. Details.

Need help?
If you need help writing, designing, personalizing or mailing your fundraising appeals, or managing your direct mail fundraising program, give me a call at Harvey McKinnon Associates, at (416) 537-2904 ext. 212

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Law #1: You Will Mail at Least One Campaign a Year
The only way to consistently grow your donor database and increase your revenue is to acquire new donors every year. If you go a year without mailing a donor acquisition package, you will experience a drop in current donors, a drop in new donors, and a drop in revenue.

Law #2: You Will Establish a Control Package
The key to success in direct mail donor acquisition is to acquire as many donors as possible at the lowest cost. The key is to establish as quickly as possible which direct mail package generates these results for you. Mail different packages to the same lists and see which package pulls in the most donors for the lowest cost. The winner becomes your control package. Mail that control package every year, and test other packages against it (test letter length, case for support, premiums, package design, inserts and so on), until a test package eventually outperforms your control package. Some control packages are so successful they are still in the mail after a decade.

Law 3: You Will Test Lists
The most important factor in your success at acquiring donors through the mail is not what you mail or when you mail but who you mail. You can mail a terrific letter to a lousy list and it will bomb. You can mail a mediocre letter to a terrific list and it can deliver acceptable results. The only way to discover which lists generate the most donors at the lowest cost is to test lists.

Law #4: You Will Interpret Your Results Correctly
Don’t get distracted by your Average Gift, Response Rate, Net Income, Cost Per Piece or Cost to Raise a Dollar. The only number that matters in acquiring new donors with paper and postage is Net Cost Per Donor Acquired.

Calculate your Net Cost Per Donor Acquired by dividing your net income (income minus expenses) by the number of donors acquired.

The biggest mistake you can make is thinking that a donor acquisition mailing is a failure if it loses money. Direct mail donor acquisition mailings almost always lose money. But they gain donors. The key metric is not how much money you gained or lost, but how much money you had to spend to acquire each new donor. Don’t look at costs, but cost-effectiveness.

Law #5: You Will Focus on Lifetime Value
You can acquire hundreds of thousands of donors cost-effectively every year but still fail at donor acquisition. That’s because the success of each acquisition campaign depends on how many new donors go on to make a second gift, a third gift, a fourth gift (you get the idea), and how many of these same new donors eventually increase their giving, join your monthly giving program, contribute to your capital campaigns, give a major gift and leave a legacy in their wills.

The key to donor retention, subsequent gifts and increased lifetime value is stewardship. Thank your new donors promptly (with a thank-you letter), welcome them to your organization (with a welcome kit), demonstrate how their gift is making a difference (with a donor newsletter), and ask them for a second gift (with a fundraising letter) sooner rather than later.

Learn More
Read Mail Superiority: How to Run a Profitable Annual Direct Mail Fundraising Program.

Need help?
If you need help acquiring donors through the mail, give me a call at Harvey McKinnon Associates, at (416) 537-2904 ext. 212

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Charities today are making the same deadly mistake.

What is seed corn? Seed corn looks like popping corn–hard, yellow kernels. You plant corn by placing the kernels in the ground one at a time, spaced out, and covering them with soil. Then you wait around five months for the kernels to sprout, grow into stalks and bear ears that you harvest and eat.

One kernel of seed corn produces one stalk, which produces at least one ear, which contains around 500 kernels. So if you plant one kernel, you harvest 500 kernels. That’s a good return on investment. But to reap the harvest, you have to plant the seed corn. And you have to wait for the results.

The dangerous thing about seed corn is that you can eat it instead of planting it. In pioneer days, a desperate, starving family would divide the hard kernels of seed corn and eat them, knowing they were destroying their hope for the coming season. They prolonged their lives for a while at the expense of their future.

Some boards of directors, scared of spending money during this recession (I’m writing in 2011), are instructing their charities to cut budgets for donor acquisition. Some boards are demanding that all donor acquisition activity cease until the economy improves. “We can’t spend money now hoping for a return tomorrow,” they say.

They are eating their seed corn. Here’s why.

Reason #1: Your donor file will shrink
If your charity is normal, the percentage of active donors in your database shrinks by up to 15 percent each year. The average rate of attrition is 7%.

Donor attrition is a fact of life (or a fact of death, depending on how you look at it) at every non-profit organization. Donors move. Donors lose their jobs. Donors divorce. Donors retire. Donors die. Their giving stops. You can’t do anything to stop it.

This inevitable, weekly, natural donor attrition is the main reason you must invest money in donor acquisition each year. You need to acquire new donors to replace the ones who stop giving. If you cut acquisition, the number of active donors in your database will shrink every year. Guaranteed.

Reason #2: You will lose money
Boards of directors slash or eliminate donor acquisition budgets because they’re misguided. They think reducing spending saves money. Well, cutting donor acquisition does save money in the short-term, obviously. If your donor acquisition budget is $200,000 a year and you eliminate donor acquisition, then you immediately save $200,000, boost your net income, and deserve a promotion and the corner office.

But wait a year and see what happens.

A year later your revenue will plummet. That’s because for every current donor you lose, you lose revenue. And for every new donor you should have acquired, but didn’t, because you eliminated donor acquisition, you lose revenue.

A year later, at least 7% of your donors will have stopped giving, and you’ll notice that on your bottom line. It will be smaller. Two, three, four, five years later, the missing income from all the new donors you never acquired will be as obvious as a FORECLOSURE sign stapled to your front door.

Reason #3: Your lifetime donor value will suffer
How much is each lost donor worth? Find out by calculating how much a typical donor gives to your charity during the donor’s lifetime. It’s likely hundreds of dollars. In some cases, thousands. How many of these donors are you willing to lose each week without replacing them?

The donor that you don’t acquire today won’t respond to your most successful direct mail appeals. She won’t join your monthly giving program in two years. She won’t give you a major gift in eight years. She won’t leave you a bequest in her Will when she passes away.

The majority of donors who join monthly giving programs, make major gifts and leave bequests are annual donors. They are already donors to the charity. Most were acquired through direct mail. They have a high lifetime value only because they gave that first new gift. If you don’t get that first gift, you don’t get the new donor. And if you don’t get the new donor, you don’t get any of the revenue that follows. The lifetime value of every donor not acquired this year is zero.

Reason #4: Your mission will suffer without new donors
Net income (fundraising revenue minus fundraising costs) is the only income you can use to carry out your mission. The higher your net income, the more you can do to improve the world. Every time you lose a donor, your capacity to bring about meaningful change diminishes. Every time you acquire a new donor, it increases.

If you want your donor file to grow, if you want your revenue from monthly gifts, major gifts and bequests to grow, if you want to continue transforming lives, you must invest in donor acquisition every year. You must plant your seed corn.

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If your donor acquisition test mailing generates an average gift of $125, can you say without fear of contradiction that your test was a success? No.

So how do you know if your direct mail donor acquisition test mailing was a feat or a failure? Answer enough of these questions in the affirmative to satisfy your boss, board, or banker.

1. Is your net cost per donor acquired acceptable?
Back in the day, which is to say, in the 1970s, charities mailed donor acquisition packages that generated a net profit. In other words, the revenue that the campaigns generated not only covered the costs of the campaign (writing, design, printing, list rentals, lettershop, postage), but also generated a profit. In those days, new donors more than covered the cost of their own acquisition.

Today, you should expect to lose money acquiring donors through the mail. How much you’re willing to “lose” is up to you and your board. After all, the “loss’ is really an investment. Your net cost per donor acquired is the investment you have to make to grow your donor database.

You calculate your net cost per donor acquired by subtracting your expenses from your revenue, and dividing the result by the number of donors acquired.

For example:
Number of pieces mailed: 50,000
Cost of the mailing: $50,000
Responses (donors): 500
Response rate: 1%
Revenue (total gifts): $34,000
Average gift: $68
Net Revenue: -$16,000
Net Cost Per Donor Acquired: $32

In this example, the charity suffers a net loss of $16,000. Some board members will look at that number and say the mailing was a failure and is never to be repeated. But look closer. The charity also acquired 500 donors. Many of whom will donate again. Each of those donors cost $32 to acquire. The charity will both break even and make a net profit with these new donors, assuming at least 48% of them give another gift of $68.

The safest way to pick an acceptable cost per donor acquired is to calculate the lifetime value of your average donor acquired by mail. If the amount of money you receive from your average direct-mail-acquired donor is many times greater than the cost of acquisition (four times greater, for example; the ratio is up to you), you can justify the cost of acquisition.

Another consideration is time until you reach break-even. How many months do you have to wait before your average direct-mail-acquired donor gives you enough money in donations to cover the cost of their acquisition? In other words, how many months from date of acquisition must you wait until your new donor starts giving you donations you can use for mission?

You can measure this in months and number of gifts. For example (using the figures from the above example), “Our typical donor acquired by direct mail must subsequently donate at least $32 to cover the cost of their acquisition so that we break even. Our new donors typically cover the cost of their acquisition and generate a net profit of $36 with their second donation, which they typically make within four months of date of acquisition.”

2. Is your average gift acceptable?
Some acquisition methods, such as premiums and trinkets, tend to generate a lower average gift than other methods. Are you happy with the average gift that your test generated? Just remember that your goal in donor acquisition is not to raise money. It’s to acquire donors. Money raised is secondary.

3. Is your response rate acceptable?
If you’ve conducted tests before, you know what your average response rate is. Did this test beat that average, or come under? If you have a goal for how many new donors you want to acquire this year, can you meet that goal with this response rate, and by mailing these lists again, or lists just like them? Remember that your goal is to acquire as many donors as possible (at an acceptable cost, of course). So the higher your response rate, the better.

4. Did enough of the lists you tested generate acceptable results?
In your test, you likely mailed at least 50,000 pieces to 10 or more lists. Some of those lists performed better than others, right? Measure your net cost per donor acquired, response rate and average gift for each list. Did enough of the lists generate the results you were after, so that you can confidently mail those lists again?

5. Did you beat your control?
In your test, you likely mailed two or more packages, each one with a different look, message and case for support. One of those packages was likely your control package (the one you’ve been mailing over and over because no other package can beat it). Did any of the packages beat your control? If one did, figure out why, repeat your test to be sure, and your test will have been a success.

Each of these metrics helps you discover, to a point, if your direct mail donor acquisition test was a success. No single metric tells you everything. You must exercise good judgment. But pay particular attention to your net cost per donor acquired. That’s the most useful metric. After all, your response rate, even if it’s in the double digits, doesn’t tell you if you made a net profit. And your average gift, even if it’s $200, doesn’t tell you if you made a net profit. But your net cost per donor acquired tells you two things: (1) if you made a net profit, and (2) how much you had to spend to acquire each donor.

Learn More
Read Mail Superiority: How to Run a Profitable Annual Direct Mail Fundraising Program.

Need help?
If you need help acquiring, renewing or upgrading direct mail donors, give me a call at Harvey McKinnon Associates, at (416) 537-2904 ext. 212

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In other words, only 35% of the donors you acquire through direct mail will give you a second gift. Most donors acquired through the mail are acquired at a net loss (you must spend money to acquire each donor), so you can see how important it is for you to do all that you can to encourage first-time donors to give again.

Here are the main reasons new donors do not give a second gift:

1. You acquire the wrong kind of donor
Donors acquired with premiums, trinkets and lotteries tend to fall away at a higher rate than donors acquired with a simple ask.

2. You ignore them
If you do not thank your new donors soon enough, or tell them what you are doing with their gift, or welcome them to your organization, they will not likely mail you a second gift.

3. You write them too often
If all you do with new donors is add them to your mailing list and then bombard them with an appeal letter each month, you will likely lose them.

4. You do not ask again soon enough
The key to securing a second gift is to ask early and ask often. Your enemy is the calendar. For every week that elapses after you have received the donor’s first gift, and where you do not ask for a second gift, your chances of losing your newly acquired donor increase. The worst thing you can do is delay four, five, six months or longer before going back to your new donor for a second gift. By that time, many will have forgotten that they even made the first gift.

To increase your percentage of new donors who go on to give a second gift, do four things:

1. Thank them promptly, personally and particularly for their first gift.

2. Send them a welcome kit. Tell them why they are a valuable part of your organization. Include anything in the welcome kit (brochure, newsletter, welcome letter, FAQs, testimonials) that draws donors closer to your mission and the people you help.

3. Show them how you are using their gift to change the world. You can do this most effectively with a donor-centred newsletter filled with pictures and stories that show donor dollars at work.

4. Ask for a second gift within eight weeks of receiving the first gift. The single largest factor in determining if you receive a second gift is how long you wait before asking for it. The longer you wait, the less likely you are to secure that all-important second donation.

Learn More
Read Mail Superiority: How to Run a Profitable Annual Direct Mail Fundraising Program.

Need help?
If you need help acquiring, renewing or upgrading direct mail donors, give me a call at Harvey McKinnon Associates, at (416) 537-2904 ext. 212

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Naturally, you’re troubled.

Most charities in Canada that are not places of worship raise a substantial portion of their operating budget using fundraising letters. Many charities also rely on the mail to recruit new donors, keep their donors up to date with newsletters, invite donors to special events, conduct donor surveys, and issue charitable tax receipts and thank-you letters. So a strike by postal workers isn’t just an inconvenience. It threatens a charity’s very existence.

Here are some ways to survive a postal strike.

1. In the weeks before the postal workers go on strike, write to your donors. Tell them that a strike is imminent, and give the anticipated strike date if possible.
2. Describe how the strike will affect your donors’ ability to communicate with you, and your ability to communicate with your donors, by mail.
3. Warn your donors to expect delays in receiving their gift acknowledgement letters, since their mail gifts, and you thank-you letters, will likely be delayed in the mail system.
4. If the labour action involves rotating strikes in cities across the country rather than a nationwide general strike, warn your donors to still expect delays, since the location and duration of each strike is unpredictable.
5. Give your donors a way to keep current on the status of the strike by showing them where to sign up for email bulletins, text alerts and media releases issued by the postal labour union and the postal service. Direct donors to the websites of each party in the strike.
6. Encourage your donors to make their donations using other methods, such as email, phone, online, text and in person.
7. Before the strike begins, make contingency plans for sending your appeals by email, provided you have the technical ability and sufficient email addresses to do so profitably.
8. If you are going to solicit gifts during the strike by email, write to donors whose email addresses you do not have on file, and invite them to give you their email addresses. Give donors an incentive, such as a gift certificate, for doing so (you’ll acquire more addresses this way).
9. If you anticipate that the strike will be prolonged, consider phoning your high-value donors and asking for a gift. Mention the impact of the strike and encourage them to either phone your charity or give online. Do this throughout the duration of the strike.
10. If you anticipate that the strike will be prolonged, write to your donors before the strike and invite them to join your monthly giving program. If some are reluctant, invite them to give a gift each month, however small, for the duration of the strike only. Stress your need for daily funds to continue helping the people you serve.
11. Before the strike begins, invite your most frequent and generous donors to mail you a series of post-dated cheques.
12. Before the strike begins, invite your donors to add your charity as an Internet banking payee so that they can donate to your cause when they pay their bills online.
13. Ramp up your homepage so that it makes a clear, compelling request for donations (perhaps even mentioning your inability to receive donations in the mail, and stressing the need for visitors to donate online or by phone instead).
14. Revise your Twitter homepage so that it stresses your need for funds during the strike, and then solicit donations in some of your tweets.
15. Post a provocative, viral video on YouTube that shows the predicament your charity will be in if you stop receiving gifts during the postal strike. Make a strong request for funds, and direct viewers to your donation page, or even better, to a special landing page dedicated to the strike.
16. Post regular status updates to your Facebook page so that your fans, friends, donors, advocates, members and everyone else is reminded regularly of your need for funds.
17. While the strike is on, email your gift acknowledgement letters, charitable gift receipts, newsletters and special event invitations.
18. If your charity has to cancel a fundraising event because of the postal strike, host the event online instead as a creative, fun, tongue-in-cheek non-event. (“Our Black Tie Non-Event will NOT take place on (date). Cocktails will NOT be served at 5:30 p.m. Dinner will NOT be served at 7 p.m. NO program will be held at 8:30 p.m.)
19. When the strike is over, and you have a backlog of gift acknowledgement letters to mail, mention in each letter that you are sorry for the delay in thanking the donor.
20. When the strike is over, don’t be tempted to persuade as many donors as possible to start giving online instead of by mail. The majority of today’s donors prefer the mail. Gifts made by email and online still make up less than 10% of the revenue for most charities in North America.

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You don’t just drop him into a pot of boiling water. He’ll jump out.

Instead, you place him in a pot of cool water, then warm the pot gradually to a boil. The frog grows accustomed to the rising temperature, until it’s too late. He boils.

Know how to go bankrupt as a charity?

Not by making one sudden radical change. That can be reversed.

No, to go bankrupt as a charity, all you have to do is continue doing what you’re doing right now, without watching for changes in your environment. Pay no attention to trends in your data, ignore industry benchmarks, and you’ll eventually reach boiling point and expire.

On the other hand, if you want to boost your net revenue each year, and continue to attract new donors, members and supporters to your cause, you must watch two things: watch for trends in your results, and watch for trends in the industry. Here are the main things you should be watching to make sure you’re not the frog in the pot.

1. Gross Donated Revenue by Channel
You raise funds using multiple channels. You need to know which channels raise the most revenue. And which ones raise the least. You can only discover this by measuring your gross donated income by channel each year, and comparing your current year results with previous years.

Look for trends. Which channels are growing? Which ones are declining? Then compare your results with other charities in general, and with other charities in your sector in particular.

Make sure you measure every channel. Some channels are growing in popularity (mobile, for example), while others are waning (fundraising banquets, for example).

Here are the major channels: bequests, direct mail, direct-response television, email, face-to-face (street & door-to-door canvassing), grant proposals, major gifts solicited in person, mobile, phone, social media, special events, website.

2. Average Gift by Channel
Some fundraising methods (channels) generate larger gifts than others. Which channel generates the largest average gift for your cause? Which channel brings in the lowest? Measure your average gift for each fundraising method you use and you’ll know. Track this number over time to discover which channels are growing more effective, and therefore need more of your resources.

3. Total Donors Acquired, by Channel
Which of your donor acquisition methods brings in the most donors, and which the least? Measure and find out. Look for trends over the past 10 years. Tweak your program accordingly. Then find out how you compare with other charities.

4. Attrition Rate by Channel
Some donor acquisition methods are notorious for high attrition rates. Direct mail donors acquired through lotteries, for example, tend to fall away (never donate again) at much higher rates than donors acquired through other methods. Which of your donor acquisition channels has the highest attrition rate? And which the lowest? You have options, you know. You can always drop a channel that has an unsustainably high attrition rate.

The key to growth is to watch for trends in your fundraising results, and to compare your organization with others in your sector to see how well you’re doing. That way you can be hot. Just not boiling hot.

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Watch a few episodes of either show and you’ll quickly discover the most common mistake wannabe entrepreneurs make: They don’t know their numbers.

They don’t know their costs. Or their break-even point. Or the size of their market. They don’t know the numbers that will persuade investors to fund their business venture. So they walk away without a penny.

In fundraising, you live or die by your numbers. You can’t hope to get your budget approved (or hold onto your job) unless you can demonstrate that you know your business. And your business is numbers.

Here are the six numbers you need to know cold.

1. Net Annual Growth in Active Donors
Every year you add donors through acquisition and lose donors through attrition. The difference between these two numbers is your net growth. It’s either positive or negative (or unchanged–unlikely). Don’t measure just the number of new donors you add annually. That number might look impressive, but it’s false. 80,232 donors acquired minus 81,439 donors lost isn’t growth.

2. Net Cost Per Donor Acquired
Figure out how much you need to spend to acquire a new donor for every channel you use (direct mail, face-to-face, online, direct response TV, special events, and so on). You need to know this number to win board approval for a donor acquisition budget. Donor acquisition costs money. The other number you need to know is Lifetime Donor Value by Channel (below).

3. Attrition Rate by Channel
Donors die, lose their jobs, move, retire, divorce and do other disagreeable things that make them stop supporting your cause. Although many of these things are beyond your control, you still need to know the number of donors you lose each year, expressed as a percentage of your active donors, and calculated for every channel you use to raise funds. When you know your attrition rate, you know how many new donors you must acquire each year just to stop your file from shrinking. Because it is shrinking.

4. Renewal Rate by Channel
What percentage of your donors who give a gift one year also give a gift the next year? That’s your renewal rate. Your renewal rate indicates how passionate your supporters are about your cause. It also indicates how successful your donor stewardship program is.

5. Second Gift Conversion Rate
Most people who make one gift to a charity never make another. If you have a low Second Gift Conversion Rate, you either are attracting donors who are unlikely to make a second gift, you are not treating your first-time donors properly, or you are not asking for that vital second gift soon enough (or all three).

6. Lifetime Donor Value by Channel
How much does one of your average donors contribute to your charity in her lifetime? That’s the number you need to know to justify your investment in donor acquisition and stewardship. Include in this number every gift ever given, including annual gifts, major gifts, special event gifts and bequests. Know this number for every channel you acquire donors by.

By the way, if you master these six numbers, and adjust your fundraising program accordingly, you’ll have the knowledge and expertise you need to negotiate another vital fundraising number: your salary.

Learn More:
Direct Mail Fundraising Arithmetic Demystified.
Master the 14 most common formulas that help you measure-and improve-your DM fundraising results.

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Nothing.

You are going to lose donors today whatever you do. Or don’t do.

Donor attrition is a fact of life at every non-profit organization. No matter how long you’ve been around, no matter how large your base of support, no matter how popular your cause, no matter how much your donors love you, some of your donors will fall away today and never give you another cent.

Today you will move backwards, no question. If your charity is small, you will lose a few donors. If your charity is large, you will lose more donors. But either way, you will have fewer donors today than you did yesterday. Your database may contain the same number of records. But the number of donors in that database that will give you another gift just shrank. And will shrink every day from today on. Here’s why.

1. Donors die
You have no control over this, or shouldn’t have. A percentage of your donors will pass away each week, and their gifts will cease the same day they do.

2. Donors lose their jobs
When the breadwinner loses a job, the first thing to be cut is discretionary spending, such as take out food, movies and charitable gifts.

3. Donors move
Sometimes a lapsed donor hasn’t lapsed at all. They’ve simply moved and forgotten to give you their new address.

4. Donors’ credit cards are declined
If your donors give by credit card through your monthly giving program, you understand donor attrition better than most fundraisers do. You see it on your spreadsheet. A percentage of your donors’ credit cards either expire each month and you never get the new expiry date. Or their donation is declined because the card is maxed out, or the card was stolen. Some of these donors you will never re-activate.

5. Donors retire
Some donors retire with little or nothing in retirement savings. Their pension supports them, though barely. So they save where they can. And that means reducing the number of charities they support, including yours.

6. Donors grow infirm
Some donors develop dementia or terminal illnesses and hand over their financial affairs to a power of attorney. Unless your donor specifies to her POA that donations to your charity are to continue, they won’t.

7. Some donors intend to give only one gift
Many of the gifts made to charities in lieu of flowers are made by strangers with no intention of supporting that charity again. People make these gifts only to honour the wishes of the family of the person who passed away.

As you can see, all of these reasons are out of your control. They are “natural” donor attrition. They account for at least 7% of all donors who stop giving.

This unavoidable, daily, natural donor attrition is the primary reason you need an ongoing, proven, board-approved donor acquisition program. Obviously, if you have dreams to grow your organization, you need to acquire new donors. But you also need a donor acquisition program even if you don’t want to grow. You need to acquire donors just to replace the ones who are falling away at the rate of about 7% of your active donors each year. Otherwise, you’ll be shrinking. Guaranteed.

Handbook Number 22
How to Recover Your Lapsed Direct Mail Donors.
Discover the financial rewards, savings and long-term benefits of wooing and winning your donors all over again using direct mail.

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The results you generate in the first few months of your direct mail acquisition campaign might delight you or they might distress you, but they will almost certainly mislead you. Don’t decide to continue of halt your program based on short-term results. That is reckless.

Here’s the problem. If you mailed two acquisition packages and Package A brought in 140,000 new donors and Package B brought in only 86,600, which package would you consider the winner?

Or if Package A generated a response rate of 1.3% while Package B generated only 0.6%, which package would you consider the winner?

Looking at these short-term results alone, you and I would declare Package A the winner. And we’d both be wrong.

We’d be wrong because we looked at the short-term results and not the lifetime value of the donors acquired by each package. Mercy Home for Boys and Girls in Chicago was making this mistake in the 1990s. They had a control package that consistently outpulled other packages in response rates and cost per donor acquired. Their control package included return address labels as a premium. And, because the package brought in more donors than any other package tested against it, Mercy Home thought they had a winner.

But as postage and list costs went up, Mercy Home did two vital things. They began testing cheaper packages against their control. And they began looking not only at short-term results, but also results that went back seven years.

What they quickly discovered was that donors who responded to Mercy Home’s premium package with one gift rarely gave a second one. During seven years of mailing that control package, they acquired 217,000 donors, but only 69,000 gave a second gift. So Mercy Home actually acquired only 69,000 donors, not 217,000.

Looking back seven years, Mercy Home discovered that Package B, even though it generated a lower response rate and brought in fewer donors initially, eventually outperformed Package A, the premium control package, in cost per donor acquired and lifetime net revenue per donor. The key to this was that a much larger percentage of donors who responded to Package B gave a second gift, and a third gift, and a fourth gift. Over time, these donors proved themselves more valuable than the one-gift-only donors who responded to Package A.

The lesson for Mercy Home, and for you and me, is to take the long-term view in direct mail donor acquisition. Always look beyond your initial numbers to measure the success of your acquisition efforts. Look at lifetime value. A mailing that appears to bomb today might be a winner. Eventually. And a mailing that appears to win today might be a loser. You just have to wait to find out.

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Q2. When do charities tend to trade lists?
A. List trading is used exclusively for donor acquisition. Charity A mails Charity B’s donors with a view to acquiring as many of those donors as possible, and vice versa.

Q3. Who “owns” the acquired donors?
A. Charities who swap lists do so with the clear understanding that any donors who respond to an acquisition mailing become donors of that charity as well.

Q4. How much does it cost?
A. List trading is free. No money changes hands.

Q5. How does the list trade take place?
A. Charities use a third party, such as a lettershop or list broker, to exchange the lists. That way, each charity can mail the other’s list only once. These third parties also de-dupe the lists so that you do not mail any donors on the other charity’s list that already support your cause.

Q6. How many names can I trade with another charity?
A. List trades are reciprocal. So however many names you want from the other charity, they will want an equal number of names from you.

Q7. Which names do I trade?
A. You will work with the other charity to decide the criteria to use when pulling your lists. The names you each select will invariably be donors who have made a gift within the past 12 months. You can further narrow your lists based on any other criteria that helps both charities.

Q8. Who do I ask to trade lists with my charity?
A. Pick charities whose donors are similar to yours but whose causes are different. Donors are unlikely to support two charities that do identical work.

Q9. What are the benefits of swapping mailing lists?
A. There are any benefits:

1. You save money on list rental fees
2. Your net income from a traded list can be twice that of a rented list
3. You stand to acquire twice as many donors as a rented list
4. Your cost of acquisition (cost per donor) is around half that of renting lists
5. The percentage of acquired donors who go on to make a second gift is higher than for donors acquired from a rented list
6. Your response rates will be higher

Q10. If I let another charity mail my donors, won’t they stop giving to me, or give less?
A Not likely. Your donors already support multiple charities and receive lots of mail from them. One more piece of mail won’t make a difference. Even if the other charity’s mailing is highly successful, 90% of your donors won’t respond. Plus, few donors give all that they can. Chances are that if they like the other charity’s mission, they will support both of you, not one or the other. And remember this vital thing: list trading is reciprocal. While the other charity is mailing your donors, you are also mailing theirs.

Q11. When should I not swap my list?
A. You should not trade your list if your privacy policy forbids the practice.

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SEMINARS
1. If you are offering a free seminar as a way to find planned giving prospects, sell the event, not your charity. Promote the valuable, exclusive information that the prospect will learn at the event.

2. Prove there is no risk to attending by giving away something of value. One software company tested its seminar mailings by offering free software (a $20 value) to half their list. The freebie doubled response.

FUNDRAISING BANQUETS
3. Attract donors to your banquet by giving them what Bob Bly calls a “carry card.” A simple card, mailed with your invitation, offers donors a free gift or chance to win something by redeeming the card at your event.

4. Tease. Indicate that your event will be wacky, fun or entertaining so that your readers can’t possibly stay away.

AWARDS SHOWS
5. Create a memorable theme. The John Caples International Awards show recently mailed me an invitation with the theme: “Why covet a Caples when you can have one?” Good question.

6. Show the view beyond the event. Help readers see themselves not just at the show, but after the show, with an award in their hands.

BEST PRACTICES
7. Create urgency by showing your deadline in prominent places throughout your invitation.

8. Capture the names and addresses of those who cannot attend by offering them something of value (hot prospects shouldn’t be penalized simply because they have a full day timer).

9. Mail more than once, preferably three times in the four weeks leading up to your event. Consider sending an email to your house list, telling invited guests to watch their mailboxes for your invitation.

10. Give guests more than one way to respond (BRE, web, email, phone, fax).

11. Use a checklist to make sure you cover everything in every invitation (such as event name, venue name, location, date, time, directions, early bird deadlines, cost, who to make the check payable to).

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If you look at a recent issue, in the top right hand corner, the subhead says “Touching the Hearts and Health of Our Community, St. Joseph’s Healthcare Foundation.” This is a hospital in the city of London, Ontario. This is a magazine
that gets mailed to people in the community who are donors, and also to those who have shown interest in supporting the organization but have not given a gift yet. You can see a sample of this newsletter/magazine at http://tinyurl.com/ygx67e6. Click the link for Chapter 1.

How long do you leave a contact on a mailing list before removing them? For example, if someone’s been on the mailing list since the inception of the ministry but they’ve never had any contact with monetary support. That’s up to
you. You have to decide if you’re using your newsletter to minister to people.

Some organizations will send a newsletter to people as long as they ask to receive it. Other organizations might be more fiscally responsible and decide they’re not in the business of just giving away information. They need to be responsible with the money they have and so they’ll keep a person on for a year or so and then send them a letter asking “Do you wish to continue receiving our newsletter? Yes or No.” And if they either don’t hear from them or get an answer in the negative, then they take them off the list. But you can do that every year. You can mail a letter to your newsletter subscribers, asking them “Do you wish to continue receiving this newsletter?” And you can clean up your list that way.

Learn more
Read Lucrative Donor Newsletters. Learn how to create, write, design and distribute donor newsletters that recruit supporters, renew donors, retain members, inspire action, build community and raise funds. See Lucrative Donor Newsletters.

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UNICEF outer envelope

You might be interested in . . .

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You know how it is. You name your price, and your buyer agrees immediately. So you immediately wonder if your price was too low. Maybe that’s why the buyer agreed to your price so quickly.

In direct mail fundraising you’ll find this same challenge. How much should you ask a person to donate if they have never donated before? If you ask for a large gift, they will not give. And if you ask for a small gift, they will give. But maybe if you ask for a gift that’s larger than your small ask but smaller than your large ask, you’ll also get a donation. If you ask for an amount that generates a huge response, you’ll likely agonize that maybe you could have asked for just a little bit more and got it.

Here are three ways to determine how much to ask for.

1. Ask your competitors how much they ask for
Phone a non-profit organization like yours, preferably one that does not compete directly for your donor’s dollar, and ask them how much they ask potential donors to give. If your competitor won’t tell you, or if you are too timid to pick up the phone, get on their mailing list and see how much they ask you to donate.

2. Find out what the average gift is for the people on the list you are mailing
If you are mailing a fundraising letter to people who have never donated to your organization before, you are likely renting a list of those names. Ask your list broker if the data card for that list contains giving levels. Some lists available for rent tell you the size of the average gift that people on that list give to charities.

3. Test a range of asks
If in doubt, test. Some lists have a higher average gift than others. So test lists by varying your ask amount. And test ask amounts over time so that you discover the optimum amount of money to ask for with a potential donor.

Asking for the right amount with a first-time gift is critical. It can mean the difference between earning net income with your mailing, breaking even, or losing your shirt, or your blouse, as the case may be.

Handbook Number 6 101 Compelling Ways to Ask for Donations with Your Fundraising Letters. The professional fundraiser’s guide to mastering the art of making the ask.

You might also be interested in…

Handbook Number 8 101 Terrific Opening Lines for Your Fundraising Letters. Dozens of quotes, statistics, anecdotes, witticisms, questions and other zingers to make your letters irresistible.

Breakthrough Fundraising Letters. How to write direct mail donation request appeals that attract more donors, raise more money, and build stronger relationships. Available in paperback and as an e-book.

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Instead, test. And, to save money and time (and further indigestion), follow these eight rules.

Rule #1: Test things that are significant
Don’t test a blue signature versus a red signature. It’s too expensive of a test. Don’t test Times Roman versus Arial. Test things that are significant. In other words, test a six-page letter versus a two-page letter. Test a full-color package versus a black and white package. These would be significant tests.

Rule #2: Test things you can control
You can control your printing, you can control the length of the letter, you can control the photography, and so on. Don’t test things that you have no control over-for example, mailing during a recession. You could have no control over that in the future.

Rule #3: Make your test large enough to be significant
Mail at least 5,000 pieces to get 50 responses at a one percent response rate. Fifty responses is considered the minimum number you must generate to achieve a trustworthy test.

Rule #4: Test one thing at a time
If you mail a package and it does really, really well and you think, “Oh, we can improve this package,” don’t do a test where you mail a similar package but you change the headline and you change the teaser copy on the envelope and you change the reply device and you change the postscript, because if the second package outperforms the first package, you won’t know what was responsible for the improvement. Was it the teaser copy on the envelope? Was it the headline? Was it the reply device? Was it the postscript? You won’t know. Test one thing at a time to be sure.

Rule #5: Don’t let large gifts skew your results
When you examine your campaign results, you see gifts of $25, $35 and $45, which is typical. But then you see a gift of $15,000 in response to the same campaign. That number will skew your results if you let it. Your spreadsheet for this campaign may tell you that the average gift was $92, but that’s because of this unusually large gift. If you take this one gift of $15,000 out of your calculation, your average gift will likely be closer to $36.

So be careful about large gifts. Remove them when you’re doing calculations to measure what your net income will be. Expect your average gift and your cost to raise a dollar to be skewed by large gifts.

Rule #6: Test acquisition mailings for people, not profit
Concentrate on acquiring loyal donors in the greatest numbers at the lowest cost. Enough said.

Rule #7: If you are starting out in direct mail, aim to acquire as many donors as possible
If you’re just starting in direct mail and you’re obviously starting with donor acquisition, aim to acquire as many donors as possible, not to make as much money as possible. Success in the mail comes after the first gift.

Rule #8: Test every time you mail
If you’re mailing to a large number of people, always test something. Test two asks, test the ask string on your reply device, test the teaser copy, test the length of the letter, test the signatory, test something of significance every time you mail. You’ll learn a lot, and you’ll improve your packages and your approach over time.

Mail Superiority. Learn the proven, step-by-step process for raising funds and friends cost effectively, year after year.

You might also like…

Handbook Number 16 Direct Mail Fundraising Arithmetic Demystified. Master 14 common formulas that help you measure—and improve—your DM fundraising results.

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–letter starts–

Hello Mr. Raiser,
My name is _______. I work for a non profit organization, the ____________. We are in a season of taking the ministry international and also growing and empowering the ministries within. I would like to draft up a professional letter, that will go out to major corporations and empowered people, asking for donations, and for it in return be a tax write off! My goal is to mail/email a donation letter to different large companies and multi-millionaires example Oprah Winfrey, Donald Trump. I’m not sure at all as to how to even begin the letter. Please help!

–letter ends–

I cannot give any helpful advice on how to begin a letter like that because a letter like that shouldn’t be started.

The most important quality to look for in a potential direct mail donor is a connection with your cause. You shouldn’t be looking for millionaires, or billionaires.

Direct mail fundraising works by soliciting small gifts from lots of people regularly. Even retired folks can give you a small gift.

Look for connection, not capacity. Donald Trump has capacity. But does he have any connection with an obscure charity with a narrow case for support that wants him to make a donation because of the tax write off? Not likely.

Look for people who have connection, not just cash. A widower on a pension who has been touched by your ministry is a better candidate for a direct mail donation than a millionaire who has no clue what you do, or where you do it, or why. An individual who lives around the corner and believes in you is a better bet for a direct mail gift than an employee in a multinational corporation headquartered in another state who manages corporate donations but doesn’t know you from Eve.

Look for friends, not funds.

Find more help in my new, 270-page book: Mail Superiority. Learn the proven, step-by-step process for raising funds and friends cost effectively, year after year.

You might also like these…

Handbook Number 17 How to Convert Your Once-Only Direct Mail Donors into Repeat Givers. Proven direct mail fundraising techniques for renewing your new members and first-time donors—year after year.

Handbook Number 15 Increase Your Income and Boost Donor Loyalty with Donor-Centered Newsletter Stories. Reap the long-term benefits of putting donors first in your donor newsletters.

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You might think that anyone designated as “lapsed” or “expired” would not be worth soliciting again, but you’d be wrong, if I may say so.

Lapsed donors and expired members are usually better prospects for a donation than cold lists. A direct mail appeal sent to people who have not given a donation in the last 12 months or 24 months or even 36 months is likely to generate a higher response rate and a higher average gift than a similar appeal mailed to a list of non-donor names that you rent.

Donors who have lapsed are a better source for donations than rented lists for a number of reasons:

1. You know they support causes like yours
2. You know they respond to direct mail appeals
3. You don’t have to pay a list rental fee to mail them

What all of this means is that re-activating a lapsed donor is cheaper than acquiring a new donor from an outside list. Your mailing costs are lower. And your cost to raise a dollar is lower.

That’s why you need a lapsed donor reactivation program, a regular series of letters and telephone calls that you make during the year to win back your friends that have fallen away.

And remember, plenty of the folks that you call “lapsed” have done nothing more sinister than move without giving you their new address (20 percent of North Americans move each year). Don’t let their small oversight be the cause of your parting. Ask the post office to forward your appeals to donors who have moved, and to notify you of their new addresses.

You might be interested in…

Over 130 Sample Fundraising Letters. International, national and local charities share examples of their direct mail fundraising expertise.

And…

Handbook Number 22 How to Recover Your Lapsed Direct Mail Donors. Discover the financial rewards, savings and long-term benefits of wooing and winning your donors all over again using direct mail.

Handbook Number 17 How to Convert Your Once-Only Direct Mail Donors into Repeat Givers. Proven direct mail fundraising techniques for renewing your new members and first-time donors—year after year.

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